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COVER SHEET
0 0 0 0 0 1 1 7 9 0
SEC Registration No.
W E L L E X I N D U S T R I E S , I N C.
A N D S U B S I D I A R I E S
(Company's Full Name)
2 2 N D F L O O R C I T I B A N K T O W E R
8 7 4 1 P A S E O D E R O X A S S T.
M A K A T I C I T Y
(Business Address : No. Street City / Town / Province)
Atty. Mariel L. Francisco (632) 706-7888
Contact Person Contact Telephone No.
1 2 3 1 A C G R - 1 6 2nd
Monday of June
Fiscal Year Month Day
FORM TYPE Annual Meeting
Secondary License Type, If Applicable
Dept. Requiring this Doc. Amended Articles Number/Section
Total Amount of Borrowings
1,015
Total No. of Stockholders Domestic Foreign
To be accomplished by SEC Personnel concerned
File Number LCU
Document I.D. Cashier
S T A M P S
Remarks = pls. use black ink for scanning purposes
2016 Annual Corporate Governance Report: WIN
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SECURITIES AND EXCHANGE COMMISSION
SEC FORM - ACGR
ANNUAL CORPORATE GOVERNANCE REPORT
1. For the Calendar Year ended December 31, 2016
2. SEC Identification Number: 11790
3. BIR Tax Identification No.: 003-946-426-000
4. WELLEX INDUSTRIES, INC. Exact name of registrant as specified
in its charter
5. Metro Manila, Philippines (Province, country or other
jurisdiction of incorporation or organization 6. (SEC Use only)
Industry Classification Code 7. 35th Flr. One Corporate Centre,
Doña Julia Vargas cor. Meralco Aves., Ortigas Center, Pasig City
Address of principal office 8. Telephone No. 706-7888 Registrant’s
telephone number, including area code 9. REPUBLIC RESOURCES AND
DEVELOPMENT CORPORATION Former name, former address, and former
fiscal year, if changed since last report.
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TABLE OF CONTENTS
A. BOARD MATTERS ……………………………………………………………………………….. 5 1) BOARD OF
DIRECTORS
(a) Composition of the Board …………………………………………………………………….. 5 (b)
Directorship in Other Companies ………………………………………………………….. 6 (c)
Shareholding in the Company ………………………………………………………….. 8
2) CHAIRMAN AND CEO …………………………………………………………………….. 8 3) OTHER
EXCUTIVE, NON-EXECUTIVE AND INDEPENDENT DIRECTORS ……………….. 9 4)
CHANGES IN THE BOARD OF DIRECTORS ……………………………………………….. 11 5)
ORIENTATION AND EDUCATION PROGRAM ……………………………………………….. 13
B. CODE OF BUSINESS CONDUCT & ETHICS ………………………………………………..
14
1) POLICIES ………………………………………………………………………………………….. 14 2)
DESSIMENATION OF CODE …………………………………………………………………….. 14 3) COMPLIANCE
WITH CODE …………………………………………………………………….. 14 4) RELATED PARTY
TRANSACTIONS ………………………………………………………….. 15
(a) Policies and Procedures …………………………………………………………………….. 15 (b)
Conflict of Interest …………………………………………………………………….. 15
5) FAMILY, COMMERCIAL AND CONTRACTUAL RELATIONS ………………………….. 16
6) ALTERNATIVE DISPUTE RESOLUTION ……………………………………………….. 17
C. BOARD MEETINGS & ATTENDANCE …………………………………………………………..
17
1) SCHEDULE OF MEETINGS …………………………………………………………………….. 17 2)
DETAILS OF ATTENDANCE OF DIRECTORS ……………………………………………….. 17 3)
SEPARATE MEETING OF NON-EXECUTIVE DIRECTORS ………………………….. 17 4)
ACCESS TO INFORMATION …………………………………………………………………….. 17 5) EXTERNAL
ADVICE ……………………………………………………………………………….. 18 6) CHANGES IN EXISTING
POLICIES ………………………………………………………….. 19
D. REMUNERATION MATTERS …………………………………………………………………….. 19
1) REMUNERATION PROCESS …………………………………………………………………….. 19 2)
REMUNERATION POLICY AND STRUCTURE FOR DIRECTORS ………………………….. 19 3)
AGGREGATE REMUNERATION ………………………………………………………….. 20 4) STOCK RIGHTS,
OPTIONS AND WARRANTS ……………………………………………….. 20 5) REMUNERATION OF
MANAGEMENT ………………………………………………………….. 21
E. BOARD COMMITTEES ……………………………………………………………………………….. 21
1) NUMBER OF MEMBERS, FUNCTIONS AND RESPONSIBILITIES
………………………….. 21 2) COMMITTEE MEMBERS ……………………………………………………………………..
21 3) CHANGES IN COMMITTEE MEMBERS ………………………………………………………….. 23 4)
WORK DONE AND ISSUES ADDRESSED ……………………………………………….. 23 5) COMMITTEE
PROGRAM …………………………………………………………………….. 23
F. RISK MANAGEMENT SYSTEM ……………………………………………………………………. 24
1) STATEMENT ON EFFECTIVENESS OF RISK MANAGEMENT SYSTEM
…………………23 2) RISK POLICY ……………………………………………………………………………….. 24 3)
CONTROL SYSTEM ……………………………………………………………………………….. 25
G. INTERNAL AUDIT AND CONTROL ………………………………………………………….. 27
1) STATEMENT ON EFFECTIVENESS OF INTERNAL CONTROL SYSTEM
……………….. 27 2) INTERNAL AUDIT
(a) Role, Scope and Internal Audit Function
…………………………………………………28 (b) Appointment/Removal of Internal Auditor
…………………………………………………28 (c) Reporting Relationship with the Audit
Committee ………………………………………28
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(d) Resignation, Re-assignment and Reasons …………………………………………………
28 (e) Progress against Plans, Issues, Findings and Examination
Trends ………………… 28 (f) Audit Control Policies and Procedures
………………………………………………… 30 (g) Mechanisms and Safeguards
…………………………………………………………… 30
H. ROLE OF STAKEHOLDERS ……………………………………………………………………… 30 I.
DISCLOSURE AND TRANSPARENCY …………………………………………………………… 32 J. RIGHTS OF
STOCKHOLDERS ……………………………………………………………………… 35
1) RIGHT TO PARTICIPATE EFFECTIVELY IN STOCKHOLDERS’ MEETING
………………… 35 2) TREATMENT OF MINORITY STOCKHOLDERS
………………………………………………… 39
K. INVESTORS RELATIONS PROGRAM …………………………………………………………… 39 L.
CORPORATE SOCIAL RESPONSIBILITY INITIATIVES ……………………………………… 40 M.
BOARD, DIRECTOR, COMMITTEE AND CEO APPRAISAL ……………………………………… 41 N.
INTERNAL BREACHES AND SANCTIONS …………………………………………………………… 41
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A. BOARD MATTERS
1) Board of Directors
Number of Directors per Articles of Incorporation 11
Actual number of Directors for the year 11
(a) Composition of the Board
The Board has an optimum combination of Executive, Non-Executive
and Independent Directors, and is in conformity with Securities
Regulation Code and listing agreements entered into with the stock
exchange in which the Company’s common shares are listed, the
Philippine Stock Exchange. The composition of the Board as of
December 31, 2016 is as follows:
Director’s Name
Type [Executive (ED), Non-Executive (NED) or
Independent Director (ID)]
If Nominee, identify the
principal
Nominator in the last election (If ID,
state the relationship with the nominator)
Date first elected
Date last elected (If ID,
state the number of
years served as ID
Elected when
(Annual/ Special
Meeting)
No. of years
served as
director
Rogelio D. Garcia NED -
Nomination and Compensation Committee
12/16/2005 11/15/2016 Elected at Annual Meeting
16
Kenneth T. Gatchalian ED -
Nomination and Compensation Committee
12/27/2002 11/15/2016
Elected at Annual Meeting
14
Elvira A. Ting ED -
Nomination and Compensation Committee
12/28/1999 11/15/2016
Elected at Annual Meeting
17
Richard L. Ricardo ED -
Nomination and Compensation Committee
10/28/2011 11/15/2016
Elected at Annual Meeting
5
Sergio R. Ortiz-Luis, Jr. ID -
Elvira A. Ting
Relationship: None 11/15/2016
11/15/2016 (ID for 1.5 months)
Elected at Annual Meeting
1.5 months
William T. Gatchalian NED -
Nomination and Compensation Committee
12/28/1999 11/15/2016
Elected at Annual Meeting
17
Joson T. Lim NED -
Elvira A. Ting
Relationship: None 08/18/2015 11/15/2016
Elected at Annual Meeting
1.5
Byoung Hyun Suh ID -
Elvira A. Ting
Relationship: None 10/28/2011
11/15/2016 (ID for 5 years)
Elected at Annual Meeting
5
Lamberto B. Mercado, Jr. NED -
Nomination and Compensation Committee
12/16/2005 11/15/2016
Elected at Annual Meeting
11
Omar M. Guinomla NED -
Nomination and Compensation Committee
10/28/2011 08/18/2015
Elected at Annual Meeting
4
James B. Palit-Ang NED -
Nomination and Compensation Committee
11/15/2016 11/15/2016
Elected at Annual Meeting
1.5 months
Note:
(1) Mr. Suh and Mr. Ortiz-Luis are serving as independent
directors of the Company for five (5) years and one and a half (1.5
mos) months as of December 31, 2016, respectively. They will be
recommended to undergo a cooling off period for two years after
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their serving for five years pursuant to SEC Memorandum Circular
No. 9 series of 2011 or when there are no suitable replacements,
will be suggested for re-election in 2017 until 2021 pursuant to
the advisory issued by the SEC dated March 31, 2016.
(b) Provide a brief summary of the corporate governance policy
that the board of directors has adopted. Please emphasize the
policy/ies relative to the treatment of all shareholders, respect
for the rights of minority shareholders and of other stakeholders,
disclosure duties and board responsibilities.
Corporate Governance Policy
The Corporation adheres to the principles and practices of good
corporate governance, as embodied in its Corporate Governance
Manual and related SEC Circulars. Continuous improvement and
monitoring of policies have been undertaken to ensure that the
Corporation observes good governance and management practices. This
is to assure the shareholders that the Corporation conducts its
business with the highest level of integrity, transparency and
accountability. The Board of Directors is elected during the annual
meeting and has the overall responsibility to oversee the
activities of the company. The Board conducts itself with honesty
and integrity to ensure a high standard of best practice on
governance for the Company and to promote and protect the interest
of the Company, its stockholders and other stakeholders. The
Company realizes its duty to protect the rights and benefits of
shareholders and to place the importance on fair and equal
treatment of shareholders. It is the Company’s policy to disclose
information with respect to business operation with accuracy and
transparency, including any issues that could impact the Company’s
business and the rights in which shareholders and minority
shareholders are entitled to, such as shareholders’ participation
in the shareholders’ meeting to exercise their voting rights, the
rights to receive dividend, or the rights to approve a decrease or
an increase of capital, etc.
(c) How often does the Board review and approve the vision and
mission? The vision and mission of the Company has been subject to
a regular review annually and at such frequency as may be
determined by the Board of Directors. The Board believes that
establishing the mission and vision of the Company should be an
ongoing process of review to ensure that they are still relevant
for the current challenges and environment.
(d) Directorship in Other Companies
(i) Directorship in the Company’s Group
Identify, as and if applicable, the members of the company’s
Board of Directors who hold the office of director in other
companies within its Group:
Director’s Name Corporate Name of the
Group of Company
Type of Directorship (Executive, Non-Executive,
Independent). Indicate if director is also the
Chairman
Kenneth T. Gatchalian Plastic City Industrial Corp. Weltex
Industries Corp.
Pacific Plastic Corp. Kennex Container Corp. Inland Container
Corp.
MPC Plastic Corp.
Executive Executive Executive Executive Executive Executive
Elvira A. Ting Plastic City Industrial Corp. Executive
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Pacific Plastic Corp. Kennex Container Corp. Rexlon Industrial
Corp.
MPC Plastic Corp.
Executive Executive Executive Executive
(ii) Directorship in Other Listed Companies
Identify, as and if applicable, the members of the company’s
Board of Directors who are also directors of publicly-listed
companies outside of its Group:
Director’s Name Name of Listed Company
Type of Directorship (Executive, Non-Executive,
Independent). Indicate if director is also the Chairman
Rogelio D. Garcia Forum Pacific, Inc. Metro Alliance Holdings
& Equities Corp.
Non-Executive Independent
Kenneth T. Gatchalian Forum Pacific, Inc. Waterfront Philippines
Incorporated Acesite (Phils.) Hotels Corporation
Executive Executive Executive
Elvira A. Ting Philippine Estates Corporation Waterfront
Philippines Incorporated
Forum Pacific, Inc. Acesite (Phils.) Hotel Corporation
Executive Executive
Non-Executive Executive
Richard L. Ricardo Waterfront Philippines Incorporated Acesite
(Phils.) Hotel Corp.
Forum Pacific, Inc.
Executive Executive
Non-Executive
Omar M. Guinomla Forum Pacific, Inc. Non-Executive
Sergio R. Ortiz-Luis, Jr. Forum Pacific, Inc. Philippine Estates
Corporation
Waterfront Phils., Inc.
Independent Independent Independent
Byoung Hyun Suh Forum Pacific, Inc. Independent
Lamberto B. Mercado, Jr. Forum Pacific, Inc. Waterfront
Philippines Incorporated
Metro Alliance Holdings & Equities Corp. Acesite (Phils.)
Hotel Corporation
Non-Executive Non-Executive Non-Executive Non-Executive
(iii) Relationship within the Company and its Group
Provide details, as and if applicable, of any relation among the
members of the Board of Directors, which links them to significant
shareholders in the company and/or in its group:
Director’s Name Name of the Significant Shareholder Description
of the relationship
Kenneth T. Gatchalian William T. Gatchalian Dee Hua T.
Gatchalian Sherwin T. Gatchalian
Father Mother Brother
Elvira A. Ting William T. Gatchalian Dee Hua T. Gatchalian
Sherwin T. Gatchalian
Brother-in-law Sister Nephew
William T. Gatchalian Dee Hua T. Gatchalian Sherwin T.
Gatchalian
Wife Son Significant shareholder
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(iv) Has the company set a limit on the number of board seats in
other companies (publicly listed, ordinary and companies with
secondary license) that an individual director or CEO may hold
simultaneously? In particular, is the limit of five board seats in
other publicly listed companies imposed and observed? If yes,
briefly described other guidelines:
Guidelines Maximum Number of Directorships in other
companies
Executive Director No limits placed N/A
Non-Executive Director No limits placed N/A
CEO No limits placed N/A
(e) Shareholding in the Company
Complete the following table on the members of the company’s
Board of Directors who directly and indirectly own shares in the
company:
Title of Class Name of Director Number of Direct
shares Citizenship
% of Capital Stock
Common Rogelio D. Garcia 200 (direct) Filipino 0.000%
Common Kenneth T. Gatchalian 100,000,100 (direct) Filipino
3.056%
Common Elvira A. Ting 111,850,000 (direct) Filipino 3.418%
Common William T. Gatchalian 835,000,100 (direct) Filipino
25.520%
Common Richard L. Ricardo 460,000 (direct) Filipino 0.014%
Common Lamberto B. Mercado, Jr. 200 (direct) Filipino 0.000%
Common Omar M. Guinomla 100,000 (direct) Filipino 0.003%
Common Byoung Hyun Suh 100 (direct) Korean 0.000%
Common Sergio R. Ortiz-Luis, Jr. 100 (direct) Filipino
0.000%
Common James B. Palit-Ang 100 (direct) Filipino 0.000%
Common Joson T. Lim 100 (direct) Filipino 0.000%
TOTAL 1,047,411,000 32.011%
No director who owns shares in the company indirectly.
2) Chairman and CEO
(a) Do different persons assume the role of Chairman of the
Board of Directors and CEO? If no, describe the checks and balances
laid down to ensure that the Board gets the benefit of independent
views.
Yes No
Identify the Chair and CEO:
Chairman of the Board Rogelio D. Garcia
CEO/President Kenneth T. Gatchalian
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(b) Roles, Accountabilities and Deliverables
Define and clarify the roles, accountabilities and deliverables
of the Chairman and CEO.
Chairman Chief Executive Officer
Role Leads/presides the meeting of the board of directors and
stockholders
Have administration and direction of the day-to-day business
affairs of the corporation
Presides at the meeting of the Board of Directors in the absence
of the Chairman or Vice-Chairman of the Board of Directors
Accountabilities Ensure that the meetings are held in accordance
with the By-Laws
Supervise the preparation of the agenda of the meeting in
coordination with the Corporate Secretary
Maintain qualitative and timely lines of communication and
information between the Board and Management
Initiate & develop corporate objectives and policies and
formulate long range projects, plans and programs for the approval
of the Board of Directors, including those for executive training,
development and compensation
Make reports to the Board of Directors and stockholders
Ensure that the administrative and operational policies of the
Corporation are carried out under his supervision and control
Deliverables Organizes and follow all rules and regulations
imposed by state law and corporation’s by-laws and other agreements
in order to ensure the effectiveness in all meetings
Comply with principles of good governance
Achieve revenue growth and increase the company’s market
share
3) Explain how the board of directors plans for the succession
of the CEO/Managing Director/President and the top key management
positions?
If any of the offices becomes vacant for whatever cause, the
Board of Directors, by majority vote may elect a successor who
shall hold office for the unexpired term. Elected officers are
normally come from within the organizations with qualifications
known to the Board.
4) Other Executive, Non-Executive and Independent Directors
Does the company have a policy of ensuring diversity of
experience and background of directors in the board? Please
explain.
The company strives to promote diversity within the Board too.
Positions that are not taken up by the major shareholders are
filled by members who have relevant experience and can bring new
ideas and opinions to the company. Profiles of director are
maintained and updated annually and at such frequency as needed.
Directors are directed also to inform the corporate secretary of
their latest seminars and trainings attended.
Does it ensure that at least one non-executive director has
experience in the sector or industry the company belongs to? Please
explain.
The company ensures that at least one of its non-executive
directors have relative experience in holding and mining companies
(industries where the company belongs). It prefers its independent
directors to be well versed in corporate matters, especially in
financial or industry matters.
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Define and clarify the roles, accountabilities and deliverables
of the Executive, Non-Executive and Independent Directors:
Executive Non-Executive Independent Director
Role To design, develop and implement strategic plans for the
company in a cost-effective and time-efficient manner
Responsible for the day-to-day operation of the company,
including managing committees and staff and developing business
plans in collaboration with the board for the future of the
company
Custodian of the governance process
Monitor the executive activity and contribute to the development
of business strategy and act in the interest of the
stockholders
Improves corporate credibility and governance standards
Plays vital role in risk management and active role in various
committees (e.g. audit committee) to ensure good governance
Accountabilities Accountable to the Chairman of the Board and
reports to the board and stockholders on a regular basis
(quarterly, semiannually or annually) about the results of
operation and financial condition of the company
Provide an independent view of the company, distinct from its
day-to-day operations
Appointed to bring to the board: independence, impartiality,
wide experience, specialist knowledge and personal qualities
To acquire proper understanding of the business of the
company
Have fiduciary duty to act in good faith and in the interest of
the company
Constructively challenge and independently contribute to the
work of the board
Deliverables Meet corporate objectives Ensures performance of
executive management is monitored with regard to the progress being
made towards achieving agreed company strategy and objectives
Provides credible financial conditions and result of operations
reports as being part of committee conducting review of financial
statements and material matters
Provide the company’s definition of “independence” and describe
the company’s compliance to the definition.
The Company believes that independence is evidenced by ability
to constructively challenged and independently contribute to the
work of the Board. An independent director shall mean a person
other than an officer or employee of the Company, its parent or its
subsidiaries or any other individual having a relationship with the
Company as would interfere with the exercise of independent
judgment in carrying out the responsibilities of a director.
It is the Company’s Board’s policy that each Board committee
(Audit and Remuneration Committee) should have at least one
independent director.
Does the company have a term limit of five consecutive years for
independent directors? If after two years, the company wishes to
bring back an independent director who had served for five years,
does it limit the term for no more than four additional years?
Please explain.
Prior to issuance of SEC Memorandum Circular No. 9, Series of
2011, the Company does not have a term limit for independent
directors. In compliance with the new memorandum, the Company will
observe the term limits for independent directors in succeeding
years in order to enhance the effectiveness of independent
directors and encourage the infusion of fresh ideas in the board of
directors.
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As stated in the new memorandum, independent directors, after
completion of the five-year service period, will recommend
undergoing a “cooling off” period of two (2) years. After the
cooling off period, the Company still wishes bring them back and
limit their term pursuant to the new memorandum of another five (5)
years.
On SEC Memorandum Circular No. 19 series of 2016 issued on
November 22, 2016, the Board’s independent directors should serve
for a maximum cumulative term of nine years. After which, the
independent director should be perpetually barred from re-election
as such in the same company, but may continue to qualify for
nomination and election as a non-independent director. In the
instance that a company wants to retain as independent director who
has served for nine years, the Board should provide meritorious
justification/s and seek shareholders’ approval during the annual
shareholders’ meeting. Reckoning of the cumulative nine-year term
is from 2012, in connection with SEC Memorandum Circular No. 9
series of 2011.
5) Changes in the Board of Directors (Executive, Non-Executive
and Independent Directors)
(a) Resignation/Death/Removal
Indicate any changes in the composition of the Board of
Directors that happened during the period:
Name Position Date of Cessation Reason No changes in the
composition of the Board of Directors during the year
(b) Selection/Appointment, Re-election, Disqualification,
Removal, Reinstatement and Suspension
Describe the procedures for the selection/appointment,
re-election, disqualification, removal, reinstatement and
suspension of the members of the Board of Directors. Provide
details of the processes adopted (including the frequency of
election) and the criteria employed in each procedure:
Procedure Process Adopted Criteria
a. Selection/Appointment
(i) Executive Directors Nominated & Pre-screened by
Nomination Committee/Elected
Ex-officio, competence & performance
(ii) Non-Executive Directors Nominated & Pre-screened by
Nomination Committee/Elected
Capable of providing an independent and impartial view of the
board’s considerations and decisions while also identifying
strongly with the company’s affairs
Pragmatic and have the ability to compromise
Integrity, common sense, good judgment, tenacity and
diplomacy
(iii) Independent Directors Nominated & Pre-screened by
Nomination Committee/Elected
Have at least one (1) share of stock of the corporation
At least a college graduate or has sufficient management
experience to substitute for such formal education or he shall been
engaged or exposed to the business of the corporation for at least
five (5) years
He shall be twenty on (21) years old up to seventy (70) years
old, however, due to consideration shall be given to qualified
independent directors up to the age of eighty (80)
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He shall have been proven to possess integrity and probity
He shall be assiduous
Procedure Process Adopted Criteria
b. Re-appointment
(i) Executive Directors Election at Annual Stockholders’
Meeting
One vote for one share (criteria same with
Selection/Appointment)
(ii) Non-Executive Directors Election at Annual Stockholders’
Meeting
One vote for one share (criteria same with
Selection/Appointment)
(iii)Independent Directors Election at Annual Stockholders’
Meeting
One vote for one share (criteria same with
Selection/Appointment)
c. Permanent Disqualification – No Directors Who Permanently
Disqualified
(i) Executive Directors Evaluated by the Board grounds for
disqualification and vote by majority
Convicted by final judgment or order by a court or competent
administrative body of any crime, offense of moral turpitude,
offense punishable by imprisonment and such other offenses
(ii) Non-Executive Directors Same process for executive
directors Same criteria for executive directors
(iii)Independent Directors Same process for executive directors
Same criteria for executive directors
If becomes an officer, employee or consultant of the
Corporation
d. Temporary Disqualification – No Directors Who Temporarily
Disqualified
(i) Executive Directors Will be given sixty (60) business days
from such disqualification to take appropriate action to remedy or
correct the disqualification. If fails or refuses to do so for
unjustified reasons, the disqualification shall become
permanent.
Refusal to comply with the disclosure requirements of Securities
Regulation Code and its implementing Rules & Regulation
Absence of more than 50% of all regular and special meetings of
the Board
Dismissal or termination for cause as director of any public or
listed corporation
(ii) Non-Executive Directors Same process for executive
directors Same criteria for executive directors
(iii)Independent Directors Same process for executive directors
If equity ownership in the Corporation exceeds 2% of the subscribed
capital stock
Same with criteria for executive directors
e. Removal – No Directors Removed from Office
(i) Executive Directors N/A N/A
(ii) Non-Executive Directors N/A N/A
(iii)Independent Directors N/A N/A
f. Re-instatement – No directors re-instated into office
(i) Executive Directors N/A N/A
(ii) Non-Executive Directors N/A N/A
(iii)Independent Directors N/A N/A
g. Suspension – No Directors Suspended
(i) Executive Directors N/A N/A
(ii) Non-Executive Directors N/A N/A
(iii)Independent Directors N/A N/A
Voting Result of the last Annual General Meeting:
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Name of Director Votes Received
Rogelio D. Garcia 2,162,938,180 shares or 66.09%
Kenneth T. Gatchalian 2,162,938,180 shares or 66.09%
Elvira A. Ting 2,162,938,180 shares or 66.09%
William T. Gatchalian 2,162,938,180 shares or 66.09%
Lamberto B. Mercado, Jr. 2,162,938,180 shares or 66.09%
Richard L. Ricardo 2,162,938,180 shares or 66.09%
Omar M. Guinomla 2,162,938,180 shares or 66.09%
Joson T. Lim 2,162,938,180 shares or 66.09%
Byoung Hyun Suh 2,162,938,180 shares or 66.09%
Miguel B. Varela 2,162,938,180 shares or 66.09%
6) Orientation and Education Program
(a) Disclose details of the company’s orientation program for
new directors, if any. No formal orientation program for new
directors but each new incoming Board Member is given detailed
briefing on the company’s background by the CEO and/or other
officers. Other Board members may also provide inputs about the
company and various issues facing the company.
(b) State any in-house training and external courses attended by
Directors and Senior Management for the past three (3) years:
The Company in association with other affiliated listed
companies has organized an in-house Corporate Governance Seminar
last December 4, 2014, November 12, 2015 and October 6, 2016
provided by SEC accredited training institution, Risk,
Opportunities, Assessment and Management (ROAM), Inc. at Manila
Pavillion, Ermita, Manila. Other training and external courses
attended by each director are described below.
(c) Continuing education programs for directors: programs and
seminars and roundtables attended during the
year:
Name of Director/Officer Date of Training Program Name of
Training Institution
Rogelio D. Garcia October 6, 2016 Corporate Governance
Seminar
Risk, Opportunities, Assessment and Management (ROAM), Inc.
Elvira A. Ting October 6, 2016 Corporate Governance Seminar
Risk, Opportunities, Assessment and Management (ROAM), Inc.
Kenneth T. Gatchalian October 6, 2016 Corporate Governance
Seminar
Risk, Opportunities, Assessment and Management (ROAM), Inc.
William T. Gatchalian October 6, 2016 Corporate Governance
Seminar
Risk, Opportunities, Assessment and Management (ROAM), Inc.
Omar M. Guinomla October 6, 2016 Corporate Governance
Seminar
Risk, Opportunities, Assessment and Management (ROAM), Inc.
Richard L. Ricardo October 6, 2016 Corporate Governance
Seminar
Risk, Opportunities, Assessment and Management (ROAM), Inc.
Lamberto B. Mercado, Jr. October 6, 2016 Corporate Governance
Seminar
Risk, Opportunities, Assessment and Management (ROAM), Inc.
Byoung Hyun Suh October 28, 2016 Corporate Governance
Seminar
Risk, Opportunities, Assessment and Management (ROAM), Inc.
Mariel L. Francisco October 6, 2016 Corporate Governance
Seminar
Risk, Opportunities, Assessment and Management (ROAM), Inc.
Joson T. Lim October 6, 2016 Corporate Governance Seminar
Risk, Opportunities, Assessment and Management (ROAM), Inc.
Sergio R. Ortiz-Luis, Jr. October 6, 2016 Corporate Governance
Seminar
Risk, Opportunities, Assessment and Management (ROAM), Inc.
James B. Palit-Ang October 6, 2016 Corporate Governance
Seminar
Risk, Opportunities, Assessment and Management (ROAM), Inc.
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B. CODE OF BUSINESS CONDUCT & ETHICS
1) Discuss briefly the company’s policies on the following
business conduct or ethics affecting directors, senior management
and employees:
Business Conduct & Ethics
Directors Senior Management Employees
(a) Conflict of Interest Must openly disclose a potential, real
or perceived conflict of interest
Do not vote on activities in which there is a conflict of
interest
To act at all times in the Company’s best interests
Are not allowed to be involved in the decision making process if
conflict of interest is present
To act at all times in the Company’s best interests
Are not allowed to be involved in the decision making process if
conflict of interest is present
(b) Conduct of Business and Fair Dealings
Should follow best practices and company policy
Must be on arm’s-length terms and free of favorable
treatment
Should follow best practices and company policy
Should follow best practices and company policy
(c) Receipt of gifts from third parties
Must be avoided or terminated unless, after disclosure to the
Board, is not harmful to the Company
Social amenities customarily associated with legitimate business
relationships are permissible (lunch, dinner or occasional gifts of
modest value)
Must be avoided or terminated
To act at all times in the Company’s best interests
Must be avoided or terminated
To act at all times in the Company’s best interests
(d) Compliance with Laws & Regulations
Must adhere and commit to meeting high ethical standards to
comply with all applicable laws & regulations
Must adhere and commit to meeting high ethical standards to
comply with all applicable laws & regulations
Must adhere and commit to meeting high ethical standards to
comply with all applicable laws & regulations
(e) Respect for Trade Secrets/Use of Non-public Information
Discourage from using such information
Discourage from using such information
Discourage from using such information
(f) Use of Company Funds, Assets and Information
Regulated through Manual on Corporate Governance and related
Company Policies and Procedures Manual
Regulated by Company Policies and Procedures Manual
Regulated by Company Policies and Procedures Manual and Employee
Handbook
(g) Employment & Labor Laws & Policies
Meet at least the minimum criteria set by the labor
authorities
Meet at least the minimum criteria set by the labor
authorities
Meet at least the minimum criteria set by the labor
authorities
(h) Disciplinary action Based on Manual on Corporate
Governance
Based on Company Policies and Procedures Manual
Based on Company Policies and Procedures Manual and Employee
Handbook
(i) Whistle Blower No formal company policy Based on Company
Policies and Procedures Manual
Based on Company Policies and Procedures Manual and Employee
Handbook
(j) Conflict Resolution Based on Manual on Corporate
Governance
Based on Company Policies and Procedures Manual
Based on Company Policies and Procedures Manual and Employee
Handbook
2) Has the code of ethics or conduct been disseminated to all
directors, senior management and employees?
Rules and procedures of the company have been disseminated to
senior management and employees. Directors are furnished copies of
Manual on Corporate Governance for guidance.
3) Discuss how the company implements and monitors compliance
with the code of ethics or conduct.
The Company has an annual review of the directors, senior
management and employees’ performance. It also conducts general
assembly to re-orient employees and review them on the implementing
code of conduct and business ethics of the company. Any
infringement of the rules & regulation are reported to
appropriate level of management and suitable action is taken within
the bounds of law and guidance of the policies and procedures
manual of the company.
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4) Related Party Transactions
(a) Policies and Procedures
Describe the company’s policies and procedures for the review,
approval or ratification, monitoring and recording of related party
transactions between and among the company and its parents, joint
ventures, subsidiaries, associates, affiliates, substantial
stockholders, officers, directors, including their spouses,
children and dependent siblings and parents and of interlocking
director relationships of members of the Board. Related Party
Transactions Policies and Procedures
(1) Parent Company All related party transactions especially
those involving material interest must be reviewed and approved by
audit committee. Such transactions have to be on arm’s-length basis
and supported by documents for recording.
(2) Joint Ventures All related party transactions especially
those involving material interest must be reviewed and approved by
audit committee. Such transactions have to be on arm’s-length basis
and supported by documents for recording.
(3) Subsidiaries All related party transactions especially those
involving material interest must be reviewed and approved by audit
committee. Such transactions have to be on arm’s-length basis and
supported by documents for recording.
(4) Entities Under Common Control All related party transactions
especially those involving material interest must be reviewed and
approved by audit committee. Such transactions have to be on
arm’s-length basis and supported by documents for recording.
(5) Substantial Stockholders All related party transactions
especially those involving material interest must be reviewed and
approved by audit committee. Such transactions have to be on
arm’s-length basis and supported by documents for recording.
(6) Officers including spouse/children/siblings/parents
All related party transactions especially those involving
material interest must be reviewed and approved by audit committee.
Such transactions have to be on arm’s-length basis and supported by
documents for recording.
(7) Directors including spouse/children/siblings/parents
All related party transactions especially those involving
material interest must be reviewed and approved by audit committee.
Such transactions have to be on arm’s-length basis and supported by
documents for recording.
(8) Interlocking director relationship of Board of Directors
Directors involved must notify the Board of any related party
transactions subject to review and evaluation of the audit
committee.
(b) Conflict of Interest
(i) Directors/Officers and 5% or more Shareholders
Identify any actual or probable conflict of interest to which
directors/officers/5% or more shareholders may be involved.
Details of Conflict of Interest (Actual or Probable)
Name of Directors: Elvira A. Ting Kenneth T. Gatchalian
Shareholders and directors of the company from which the company
subleases an office space and entered into consultancy agreement
for providing corporate planning and financial services
Name of Officers: Kenneth T. Gatchalian(President) Elvira A.
Ting (Vice President)
Shareholders and directors of the company from which the company
subleases an office space and entered into consultancy agreement
for providing corporate planning and financial services
Name of Significant Shareholders N/A
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(ii) Mechanism
Describe the mechanism laid down to detect, determine and
resolve any possible conflict of interest between the company
and/or its group and their directors, officers and significant
shareholders.
Directors/Officers/Significant Shareholders
Company The Company recognized the significance of a whistle
blower policy. Any detection of possible conflict of interest
should be notified and reported to appropriate level of management
(Board of Directors) and resolved within the Board.
Group The Company recognized the significance of a whistle
blower policy. Any detection of possible conflict of interest
should be notified and reported to appropriate level of management
(Board of Directors) and resolved within the Board.
5) Family, Commercial and Contractual Relations
(a) Indicate, if applicable, any relation of a family,
commercial, contractual or business nature that exists between the
holders of significant equity (5% or more), to the extent that they
are known to the company:
Name of Related Significant Shareholders
Type of Relationship Brief Description of the
Relationship
William T. Gatchalian Dee Hua T. Gatchalian Sherwin T.
Gatchalian
Family William T. Gatchalian and Dee Hua T. Gatchalian are
husband
and wife. Sherwin T. Gatchalian is their son.
(b) Indicate, if applicable, any relation of a commercial,
contractual or business nature that exists between the holders or
significant equity (5% or more) and the company:
Name of Related Significant Shareholders
Type of Relationship Brief Description of the
Relationship
N.A. N.A. N.A.
(c) Indicate any shareholder agreements that may impact on the
control, ownership and strategic direction of the company:
No such shareholders agreements in place that may impact on the
control, ownership and strategic direction of the company
Name of Shareholders % of Capital Stock Affected
(Parties) Brief Description of the
Relationship
N.A. N.A. N.A.
6) Alternative Dispute Resolution
Describe the alternative dispute resolution system adopted by
the company for the last three (3) years in amicably settling
conflicts or differences between the corporation and its
stockholders, and the corporation and third parties, including
regulatory authorities.
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Alternative Dispute Resolution System
Corporation & Stockholders No conflicts or differences
occurred for the last three (3) years
Corporation & Third Parties No conflicts or differences
occurred for the last three (3) years
Corporation & Regulatory Authorities No conflicts or
differences occurred for the last three (3) years
The Company has not had disputes in the last three (3) years
with the stockholders, third parties or regulatory parties. Though
there is no formal alternative dispute resolution in place, the
Company adheres to the observation of due process in resolving
conflict. In case of significant matters, the Company will opt to
seek external advice (legal, independent parties, etc.)
C. BOARD MEETINGS & ATTENDANCE
1) Are Board of Directors’ meetings scheduled before or at the
beginning of the year?
Regular meetings of the Board of Directors are held as needed.
The Company generally decides on these meetings a few weeks in
advance of the date these take place rather than pre-scheduling
before or at the beginning of the year.
2) Attendance of Directors
Board Name Date of Election
No. of Meetings Held during the
year
No. of Meetings Attended
%
Chairman Rogelio D. Garcia 11/15/2016 4 4 100
Member Kenneth T. Gatchalian 11/15/2016 4 4 100
Member Elvira A. Ting 11/15/2016 4 4 100
Member Richard L. Ricardo 11/15/2016 4 4 100
Member Lamberto B. Mercado, Jr. 11/15/2016 4 4 100
Member Omar M. Guinomla 11/15/2016 4 4 100
Member William T. Gatchalian 11/15/2016 4 4 100
Member Joson T. Lim 11/15/2016 4 4 100
Member James B. Palit-Ang 11/15/2016 1 0 0%
Independent Sergio R. Ortiz-Luis, Jr. 11/15/2016 1 1 100
Independent Byoung Hyun Suh 11/15/2016 4 2 50
3) Do non-executive directors have a separate meeting during the
year without the presence of any executive? If yes,
how many times? No
4) Is the minimum quorum requirement for Board decisions set at
two-thirds of board members? Please explain. As per Corporation’s
By-Laws, a majority of the number of directors constitutes a quorum
for the transaction of corporate business and every decision of at
least a majority of the directors present at the meeting at which
there is a quorum is valid as a corporate act except for the
election of officers which requires the vote of a majority of all
the members of the Board.
5) Access to Information
(a) How many days in advance are board papers for board of
directors meetings provided to the board?
Generally, all the board papers are sent a week in advance of
the meeting.
(b) Do board members have independent access to Management and
the Corporate Secretary?
Yes, they do (personally, and via telephone/mobile, e-mail and
fax transmission)
(c) State the policy of the role of the company secretary. Does
such role include assisting the Chairman in preparing the board
agenda, facilitating training of directors, keeping directors
updated regarding any relevant statutory and regulatory changes,
etc.?
The Corporate Secretary shall be the custodian of and shall
maintain the corporate books and record and shall be the recorder
of the Corporation’s formal actions and transactions. His/Her
specific duties include recording the minutes and transactions of
all meetings of the directors and the stockholders; to keep
record
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books showing the details required by law with respect to the
stock certificates of the corporation, including ledgers and
transfer books; to keep corporate seal and affix it to all papers
and documents requiring a seal and to attest by his signature all
corporate documents requiring the same; to attend to the giving and
serving of all notices of the Corporation and assists the Chairman
in preparing the agenda; to certify to such corporate acts,
countersign corporate documents or certificates, and make reports
or statements as may be required of him by law or by government
rules and regulations; and to act as the inspector at the election
of directors and, as such, to determine the number of shares of
stock outstanding and entitled to vote, the shares of stock
represented at the meeting, the existence of a quorum, the validity
and effect of proxies, and to receive votes, ballots or consents,
determine the results, and do such acts as are proper to conduct
the election or vote.
Yes, the function of the Corporate Secretary includes assisting
in the preparation of the agenda of the meetings. Being a lawyer,
the Corporate Secretary also counsels and advises the Board on the
proper steps and legal implications of taking certain corporate
actions such as shares issuances and other forms of exercise of
corporate powers. He/She ensures that the Board and the members of
senior management have the proper advice in the discharge of their
duties to the corporation and the stockholders.
(d) Is the corporate secretary trained in legal, accountancy or
company secretarial practices? Please explain should the answer be
in the negative.
The Company’s corporate secretary is a lawyer. She is currently
an associate in law firm.
(e) Committee Procedures
Disclose whether there is procedure that Directors can avail of
to enable them to get information necessary to be able to prepare
in advance for the meetings of different committees: Yes No
Committee Details of the procedures
Executive No such committee
Audit Management will notify the members of the committee of any
material matters that need to be addressed by the committee.
Outline of the agenda will be send through e-mail, fax transmission
or sending hard copies to their offices.
Nomination Any vacancies on the board seat are addressed by this
committee. Management provides information with regards to
qualifications and professional background of nominees to members
of this committee for pre-screening and recommendation on the next
meeting of the board.
Remuneration Copies of presentation and outline of agenda are
provided by management to members of this committee.
Others (specify) No other committees
6) External Advice
Indicate whether or not a procedure exists whereby directors can
receive external advice and if so, provide details:
Procedures Details No formal procedure but members can ask for
external advice External advice not requested in the past
7) Change/s in existing policies
Indicate, if applicable, any change/s introduced by the Board of
Directors (during its most recent term) on existing policies that
may have an effect on the business of the company and the reason/s
for the change:
Existing Policies Changes Reason
Not applicable No changes made Not applicable
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D. REMUNERATION MATTERS 1) Remuneration Process
Disclose the process used for determining the remuneration of
the CEO and the (4) most highly compensated management
officers:
Process CEO Top 4 Highest Paid Management Officers
(1) Fixed remuneration Based on section 13 of corporation’s
By-Laws (as amended). Remuneration should be determined by the
Board of Directors considering the corporation’s culture, industry
standards and control environment.
Based on section 13 of corporation’s By-Laws (as amended).
Remuneration should be determined by the Board of Directors upon
recommendation of the CEO/President.
(2) Variable remuneration Not provided Not provided
(3) Per diem allowance CEO/President who is also a director
shall receive a per diem allowance for his attendance at each
meeting of the Board based on section 8 of corporation’s By-Laws
(as amended).
Based on recommendation of CEO/President in cooperation with
Compensation Committee.
(4) Bonus Based on annual profitability Based on annual
profitability
(5) Stock options and other financial instruments
Not provided Not provided
(6) Others (specify) Not provided Not provided
2) Remuneration Policy and Structure for Executive and
Non-Executive Directors
Disclose the company’s policy on remuneration and the structure
of its compensation package. Explain how the compensation of
Executive and Non-Executive Directors is calculated.
Remuneration Policy Structure of Compensation
Packages
How Compensation is Calculated
Executive Directors As determined by the Board and
recommendation of Compensation Committee
Basic pay, performance bonus depending on company
profitability
Compensation package as determined by the Compensation Committee
less corresponding withholding taxes.
Non-Executive Directors As determined by the Board and
recommendation of Compensation Committee
Nominal amount of per diem during attendance in meetings.
Compensation package as determined by the Compensation Committee
less corresponding withholding taxes.
Do stockholders have the opportunity to approve the decision on
total remuneration (fees, allowances, benefits-in- kind and other
emoluments) of board of directors? Provide details for the last
three (3) years.
Remuneration Scheme Date of Stockholders’ Approval Not presented
to stockholders Not applicable
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3) Aggregate Remuneration
Complete the following table on the aggregate remuneration
accrued during the most recent year:
Remuneration Item Executive Directors Non-executive Directors
(other than independent
directors) Independent Directors
(a) Fixed Remuneration 100,000.00 70,000.00 -0-
(b) Variable Remuneration -0- -0- -0-
(c) Per diem allowance -0- -0- 30,000.00
(d) Bonuses -0- -0- -0-
(e) Stock options and/or other financial instruments
-0- -0- -0-
(f) Others (specify) -0- -0- -0-
Total 100,000.00 70,000.00 30,000.00
Due to continued losses suffered by the company, other forms of
compensation have been suspended.
Other Benefits Executive Directors Non-executive Directors
(other than independent
directors) Independent Directors
(g) Fixed Remuneration No other benefits provided
No other benefits provided
No other benefits provided
(h) Variable Remuneration No other benefits provided
No other benefits provided
No other benefits provided
(i) Per diem allowance No other benefits provided
No other benefits provided
No other benefits provided
(j) Bonuses No other benefits provided
No other benefits provided
No other benefits provided
(k) Stock options and/or other financial instruments
No other benefits provided
No other benefits provided
No other benefits provided
(l) Others (specify) No other benefits provided
No other benefits provided
No other benefits provided
Total Not applicable Not applicable Not applicable
4) Stock Rights, Options and Warrants
(a) Board of Directors
Complete the following table, on the members of the company’s
Board of Directors who own or are entitled to stock rights, options
or warrants over the company’s shares:
Director’s
Name Number of Direct
Option/Rights/Warrants Number of Indirect
Option/Rights/Warrants Number of equivalent
shares
Total % from Capital Stock
N/A N/A N/A N/A N/A
(b) Amendments of Incentive Programs Indicate any amendments and
discontinuation of any incentive programs introduced, including the
criteria used in the creation of the program. Disclose whether
these are subject to approval during the Annual Stockholders’
Meeting:
Incentive Program Amendments Date of Stockholders’ Approval
N/A N/A N/A
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5) Remuneration of Management
Identify the five (5) members of management who are not at the
same time executive directors and indicate the total remuneration
received during the financial year:
Name of Officer/Position Total Remuneration
Not applicable. The Management function of the company is
performed by its affiliate as covered by the management consultancy
agreement entered into by both parties.
Total management fee paid during the year amounted to
P480,000.00
E. BOARD COMMITTEES
1) Number of Members, Functions and Responsibilities
Provide details on the number of members of each committee, its
functions, key responsibilities and the power/authority delegated
to it by the Board:
Commitee
No. of Members
Committee Charter
Functions Key
Responsibilities Power
Executive Director
(ED)
Non-Executive Directors (NED)
Independent Director
(ID)
Executive N/A N/A N/A N/A N/A N/A N/A
Audit 2 -0- 1 Develop a transparent
financial management
system
Review all financial reports
against its compliance
Perform oversight financial
management functions
Pre-approve all audit plans and scope of work
and issuance of audit reports
Nomination 1 1 1 Attract personnel that
can act as guides to the company’s
expansionary prospects
Pre-screen & shortlist
candidates
Review and evaluate the
qualifications of all persons
nominated to the Board
Decide if candidates possess the
right qualifications & can be elected to the Board
Remuneration
1 1 1 Compensate competent personnel
adequately to retain their services
Establish procedures to develop policy
on remuneration of directors and officers
Provide oversight over remuneration
of senior management &
other key personnel to
ensure that their compensation is
consistent with the corporation’s
culture, strategy and the business environment in
which it operates
Designate amount of
remuneration to attract and
retain personnel
Others (specify)
N/A N/A N/A N/A N/A N/A N/A
2) Committee Members
(a) Executive Committee
Office Name Date of
Appointment No. of
Meetings Held No. of Meetings
Attended %
Length of Service in the Committee
Chairman N/A N/A N/A N/A N/A N/A
Member (ED) N/A N/A N/A N/A N/A N/A
Member (NED) N/A N/A N/A N/A N/A N/A
Member (ID) N/A N/A N/A N/A N/A N/A
Member N/A N/A N/A N/A N/A N/A
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(b) Audit Committee
Office Name Date of
Appointment
No. of Meetings
Held
No. of Meetings Attended
% Length of
Service in the Committee
Chairman (ID) Byoung Hyun Suh (ID) 11/15/2016 1 1 100 4
years
Member (ED) Elvira A. Ting (ED) 11/15/2016 1 1 100 4 years
Member (ED) Kenneth T. Gatchalian (ED) 11/15/2016 1 1 100 3
years
Disclose the profile or qualifications of the Audit Committee
members.
Mr. Suh, 58 years old, is a Korean national. He holds a
Bachelors Degree in Business Administration from Korea University
in Seoul, South Korea. He is the president of Pan Islands, Inc.,
Three Seven Foods & Products, Inc. and Golden Shin Jan Farm
since 1995. He is also the president of Overseas Korean Traders
Associations since 2004 and KIA Inter-Trade Asia Regional Office
from 1995 to 1997. Being in executive position, dwelling in
extensive decision making, Mr. Suh is capable of giving independent
view about the company’s internal control processes and gives
unbiased audit decisions. Ms. Ting, 56 years old, holds a degree in
BSBA Major in Management at Philippine School of Business
Administration. She serves on the Boards of several companies,
including banking institutions, hotel, investment and holding
companies. Being a treasurer on other companies, gives her
knowledge on financial management and pertinent accounting
standards. Mr. Kenneth T. Gatchalian, 40 years old, holds a degree
in Bachelor of Science in Architecture from University of Texas in
San Antonio, Texas, USA. At young age, he serves on the Boards of
several companies that make him well versed in decision making and
analysis of business processes. Describe the Audit Committee’s
responsibility relative to the external auditor.
Prior to the commencement of the external audit, Audit Committee
discuss with the external auditors the nature, scope and expenses
of the audit, and ensure proper coordination if more than one audit
firm is involved in the activity to secure proper coverage and
minimize duplication of efforts. The committee performs oversight
functions over the corporation’s internal and external auditors. It
ensures that the internal and external auditors act independently
from each other, and that both auditors are given unrestricted
access to all records, properties and personnel to enable them to
perform their respective audit functions. The committee review
reports submitted by the internal and external auditors. It also
evaluate and determine the non-audit work, if any, of the external
auditor, and review periodically the non-audit fees paid to the
external auditor in relation to their significance to the total
annual income of the external auditor and to the corporation’s
overall consultancy expenses. The committee shall disallow any
non-audit work that will conflict with his duties as an external
auditor or may pose a threat to his independence. The non-audit
work, if allowed, should be disclosed in the corporation’s annual
report.
(c) Nomination Committee
Office Name Date of
Appointment
No. of Meetings
Held
No. of Meetings Attended
% Length of
Service in the Committee
Chairman (NED) Rogelio D. Garcia (NED) 11/15/2016 1 1 100 4
years
Member (ID) Sergio R. Ortiz-Luis, Jr. (ID) 11/15/2016 1 1 100 1
year
Member (ED) Kenneth T. Gatchalian (ED) 11/15/2016 1 1 100 4
years
(d) Remuneration Committee
Office Name Date of
Appointment
No. of Meetings
Held
No. of Meetings Attended
%
Length of Service in
the Committee
Chairman (ED) Elvira A. Ting (ED) 11/15/2016 1 1 100 4 years
Member (ID) Sergio R. Ortiz-Luis, Jr. (ID) 11/15/2016 1 1 100 1
year
Member (ED) Lamberto B. Mercado, Jr. (NED) 11/15/2016 1 1 100 4
years
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(e) Others (specify)
Office Name Date of
Appointment
No. of Meetings
Held
No. of Meetings Attended
% Length of
Service in the Committee
Chairman N/A N/A N/A N/A N/A N/A
Member (ED) N/A N/A N/A N/A N/A N/A
Member (NED) N/A N/A N/A N/A N/A N/A
Member (ID) N/A N/A N/A N/A N/A N/A
Member N/A N/A N/A N/A N/A N/A
3) Changes in Committee Members Indicate any changes in
committee membership that occurred during the year and the reason
for the change:
Name of Committee Name Reason
Executive Not applicable Not applicable
Audit None None
Nomination None None
Remuneration None None
Others (specify) Not applicable Not applicable
4) Work Done and Issues Addressed Describe the work done by each
committee and the significant issues addressed during the year.
Name of Committee Work Done Issues Addressed
Executive Not applicable Not applicable
Audit Approval of the audited financial statements
Review of the status of the filed petition for corporate
rehabilitation before the regional trial court of Valenzuela City
and possible progress thereof.
Nomination Considered antecedents of people nominated for the
positions
Nominate competent members only
Remuneration Considered financial condition of the company in
connection with providing remuneration to directors and
officers
Capability of the company to provide escalated amount of
remuneration to directors and officers based on company financial
condition
Others (specify) Not applicable Not applicable
5) Committee Program
Provide a list of programs that each committee plans to
undertake to address relevant issues in the improvement or
enforcement of effective governance for the coming year.
Name of Committee Planned Programs Issues Addressed
Executive Not applicable Not applicable
Audit Will conduct regular evaluation of investment &
determination of impairment. Updates on some operational
activities.
Impairment of investment. Firm up of internal controls and
suggestion of cost cutting measures
Nomination Will continue review & evaluation of
qualifications of all nominees
Term limit of independent directors & pre-screen of
qualifications of new nominees
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Remuneration Will establish check and balance procedure in
providing remuneration package to directors and officers
Capability of the company to provide escalated amount of
remuneration to directors and officers based on company financial
condition
Others (specify) Not applicable Not applicable
F. RISK MANAGEMENT SYSTEM
1) Disclose the following:
(a) Overall risk management philosophy of the company;
Risk management is a fundamental part of the Company’s business
strategy and effective corporate governance. The Company adopts a
risk philosophy aimed at maximizing business opportunities and
minimizing adverse outcomes, thereby enhancing shareholder value by
balancing risk and reward.
(b) A statement that the directors have reviewed the
effectiveness of the risk management system and commenting on the
adequacy thereof;
The Company’s risk management is coordinated with the Board of
Directors, and focuses on actively securing the short-term cash
flows by minimizing the exposure to financial markets. The Board
have reviewed the effectiveness of the risk management system and
satisfied itself on its adequacy.
(c) Period covered by the review – current year 2016
(d) How often the risk management system is reviewed and the
director’s criteria for assessing its effectiveness;
The Board reviews the risk management system annually
simultaneous with the on-going audit of financial statements. The
Board uses different approach in assessing effectiveness of various
risk areas such as: gearing ratio for capital risk, carrying amount
of financial assets for credit risk, ratio of cash to current
liabilities for liquidity ratio, etc.
(e) Where no review was conducted during the year, an
explanation why not.
The Board had conducted review annually.
2) Risk Policy
(a) Company
Give a general description of the company’s risk management
policy, setting out and assessing the risk/s covered by the system
(ranked according to priority), along with the objective behind the
policy for each kind of risk:
Risk Exposure Risk Management Policy Objective
Credit Risk This risk is managed on a group basis. It arises
from cash, trade and other receivables and advances to affiliates
and subsidiaries. Cash – deposit its cash balance in a commercial
and universal bank to minimize credit risk exposure. Trade and
receivables – assess for indicators of impairment by reviewing the
age of accounts Advances to affiliates and stockholders – continue
review for any legally enforceable right to offset with liabilities
with the expressed intention of the borrower to settle on a net
basis.
To maintain a strong credit rating and be able to meet financial
obligations as they fall due
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Capital Risk Monitor capital on the basis of the gearing ratio
(net debt divided by total capital). Keep the gearing ratio below
50%
To safeguard the Company’s ability to continue as a going
concern, so that it can continue to provide returns for
stockholders and maintain an optimal capital structure to reduce
the cost of capital.
Liquidity Risk Regularly monitoring cash position Be able to
meet financial obligations as they fall due
(b) Group
Give a general description of the Group’s risk management
policy, setting out and assessing the risk/s covered by the system
(ranked according to priority), along with the objective behind the
policy for each kind of risk:
Risk Exposure Risk Management Policy Objective
Credit Risk This risk is managed on a group basis. It arises
from cash, trade and other receivables and advances to affiliates
and subsidiaries. Cash – deposit its cash balance in a commercial
and universal bank to minimize credit risk exposure. Trade and
receivables – assess for indicators of impairment by reviewing the
age of accounts Advances to affiliates and stockholders – continue
review for any legally enforceable right to offset with liabilities
with the expressed intention of the borrower to settle on a net
basis.
To maintain a strong credit rating and be able to meet financial
obligations as they fall due
Capital Risk Monitor capital on the basis of the gearing ratio
(net debt divided by total capital). Keep the gearing ratio below
50%
To safeguard the Group’s ability to continue as a going concern,
so that it can continue to provide returns for stockholders and
maintain an optimal capital structure to reduce the cost of
capital.
Liquidity Risk Regularly monitoring cash position Be able to
meet financial obligations as they fall due
(c) Minority Shareholders
Indicate the principal risk of the exercise of controlling
shareholders’ voting power.
Risk to Minority Shareholders
All shareholders have one vote per share; so minority
shareholders voting power is not truncated
3) Control System Set Up
(a) Company
Briefly describe the control systems set up to assess, manage
and control the main issue/s faced by the company:
Risk Exposure Risk Assessment (Monitoring and Measurement
Process)
Risk Management and Control (Structures, Procedures, Actions
Taken)
Credit risk May not have a good credit ratings when planning to
apply for bank loan
This risk is managed on a group basis. It arises from cash,
trade and other receivables
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and join government projects and advances to affiliates and
subsidiaries. Cash – deposit its cash balance in a commercial and
universal bank to minimize credit risk exposure. Trade and
receivables – assess for indicators of impairment by reviewing the
age of accounts Advances to affiliates and stockholders – continue
review for any legally enforceable right to offset with liabilities
with the expressed intention of the borrower to settle on a net
basis.
Liquidity Risk The Company will not be able to meet its
financial obligations as they fall due.
Regularly monitoring cash position Maintaining adequate
reserves, banking facilities and reserve borrowing facilities
Monitoring forecast and actual cash flows and matching the maturity
profiles of financial assets and liabilities
Capital Risk The Company will not be able to continue as a going
concern and unable to maintain its strong credit rating and healthy
capital ratios
Monitoring capital on the basis of gearing ratio and keeping it
below 50% as proportion to net debt to capital. Profiles for
capital ratios are set in the light of changes in the Company’s
external environment and the risks underlying the Company’s
business operations and industry.
(b) Group
Briefly describe the control systems set up to assess, manage
and control the main issue/s faced by the company:
Risk Exposure Risk Assessment (Monitoring and Measurement
Process)
Risk Management and Control (Structures, Procedures, Actions
Taken)
Credit risk May not have a good credit ratings when planning to
apply for bank loan and join government projects
This risk is managed on a group basis. It arises from cash,
trade and other receivables and advances to affiliates and
subsidiaries. Cash – deposit its cash balance in a commercial and
universal bank to minimize credit risk exposure. Trade and
receivables – assess for indicators of impairment by reviewing the
age of accounts Advances to affiliates and stockholders – continue
review for any legally enforceable right to offset with liabilities
with the expressed intention of the borrower to settle on a net
basis.
Liquidity Risk The Group will not be able to meet its financial
obligations as they fall due.
Regularly monitoring cash position Maintaining adequate
reserves, banking facilities and reserve borrowing facilities
Monitoring forecast and actual cash flows and matching the maturity
profiles of financial assets and liabilities
Capital Risk The Group will not be able to continue as a going
concern and unable to maintain its strong credit rating and healthy
capital ratios
Monitoring capital on the basis of gearing ratio and keeping it
below 50% as proportion to net debt to capital. Profiles for
capital ratios are set in the light of changes in the Group’s
external environment and the risks underlying the Group’s business
operations and industry.
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(c) Committee
Identify the committee or any other body of corporate governance
in charge of laying down and supervising these control mechanisms,
and give details of its functions:
Committee/Unit Control Mechanism Details of its Functions
Audit Committee Oversight control Financial reporting
control
Provide oversight over Management’s activities in managing
credit, market, liquidity, operational, legal and other risk of the
corporation including regular receipt from Management of
information on risk exposures and risk management activities.
Monitor and evaluate the adequacy and effectiveness of
corporation’s internal control system including financial reporting
control and information technology security
G. INTERNAL AUDIT AND CONTROL
1) Internal Control System Disclose the following information
pertaining to the internal control system of the company: (a)
Explain how the internal control system is defined for the
company;
Internal controls encompasses a set of rules, policies and
procedures the Company implements to provide reasonable assurance
that its financial reports are reliable, its operations are
effective and efficient and its activities comply with applicable
laws and regulations.
(b) A statement that the directors have reviewed the
effectiveness of the internal control system and whether they
consider them effective and adequate;
The Board of Director reviewed the effectiveness of internal
control system at regular meetings or at such frequency as needed
and satisfied itself on its effectiveness and adequacy.
(c) Period covered by the review – current year 2016 (d) How
often internal controls are reviewed and the directors’ criteria
for assessing the effectiveness of the
internal control system
The Board of Director reviewed the effectiveness of internal
control system at regular meetings or at such frequency as needed
using criteria such as control activities, information and
communication system and monitoring.
(e) Where no review was conducted during the year, an
explanation why not.
There was a review conducted by the Board of Directors
2) Internal Audit
(a) Role, Scope and Internal Audit Function Give a general
description of the role, scope of internal audit work and other
details of the internal audit function.
Role Scope
Indicate whether In-house or
outsource Internal Audit Function
Name of Chief Internal
Auditor/Auditing Firm
Reporting Process
To provide the Board, senior management and stockholders
with
Nature and complexity of business and the
In-house internal audit function
Marites L. Gaa-Lacsina
Internal Auditor shall report to the Audit Committee.
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reasonable assurance that its key organizational and procedural
controls are effective, appropriate and complied with.
business culture; volume, size and complexity of transactions;
degree of risks; degree of centralization and delegation of
authority; extent and effectiveness of information technology;
extent of regulatory compliance
She should submit to the Audit Committee and Management an
annual report on the internal audit department’s activities,
responsibilities and performance relative to the audit plans and
strategies as approved by the Audit Committee.
(b) Do the appointment and/or removal of the Internal Auditor or
the accounting/auditing firm or corporation
to which the internal audit function is outsourced require the
approval of the audit committee?
Yes. It requires approval of the Audit Committee.
(c) Discuss the internal auditor’s reporting relationship with
the audit committee. Does the internal auditor have direct and
unfettered access to the board of directors and the audit committee
and to all records, properties and personnel?
The Internal Auditor shall report to the Audit Committee. Also,
the Internal Auditor should submit to the Audit Committee and
Management an annual report on the internal audit department’s
activities, responsibilities and performance relative to the audit
plans and strategies as approved by the Audit Committee.
Yes. The internal auditor has a direct and unfettered access to
the board, audit committee and to all records, properties and
personnel.
(d) Resignation, Re-assignment and Reasons
Disclose any resignation/s or re-assignment of the internal
audit staff (including those employed by the third-party auditing
firm) and the reason/s for them.
Name of Audit Staff Reasons
Not applicable
(e) Progress against Plans, Issues, Findings and Examination
Trends
State the internal audit’s progress against plans, significant
issues, significant findings and examination trends.
Progress Against Plans The audits undertaken are based on the
annual internal audit plan approved by the audit committee.
Variations to the plan can occur but need to be considered with and
agreed by the audit committee. Focus of audit for the year 2016 was
on the status of the petition filed for corporate rehabilitation
plan of the Group before the regional trial court of Valenzuela
City, which is now with the Supreme Court for decision. Management
plans for the next twelve months and the assessment of risks the
Company are exposed to such as credit, liquidity and capital risk.
Respondents include legal and executive department, accounting and
treasury department. Notice to conduct audit and list of audit
requirements (documents, accounting books, survey forms, etc.) were
sent to department heads two weeks before the actual conduct of the
audit. Audit was completed and report was issued to Audit Committee
on its meeting on February 22, 2017.
Issues Compliance with applicable laws and regulations Liquidity
and Capital Risk Management plans (corporate rehabilitation
plan)
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Findings The company is exposed to liquidity and capital risk.
Liquidity risk refers to the risk that the Company will not be able
to meet its financial obligation as they fall due. Capital risk, on
the other hand, refers to risk that the Company will not be able to
continue as a going concern and maintains its strong credit rating
and healthy capital ratios to support its business and maximize
shareholder value. After the company amended its articles of
incorporation with SEC due to change of business address, the
company is processing its transfer of Revenue District from RDO 50
(Makati) to RDO 43A (Pasig). The company has paid penalties for
open cases for the previous years’ unfiled tax returns. For
structured reports for SEC and PSE, the company has complied
efficiently.
On November 19, 2014 the Group received the Order dated October
20, 2014 of the Court which disapproved the enhanced rehabilitation
plan of petitioners and converted the rehabilitation case into one
for liquidation. The Court also issued an Order of even date which
declared petitioners insolvent, ordered the liquidation of the
assets of the petitioners and directed the Sheriff to immediately
take possession and safely keep all real and personal properties of
petitioners, among others, until appointment of a liquidator.
On December 15, 2014, petitioners filed Petition for Review with
the Court of Appeals, docketed as CA-G.R. SP No.138273, assailing
the aforementioned Orders of the RTC. The case is pending
resolution before the Court of Appeals as of December 31, 2014.
On December 18, 2015, the CA issued its decision pertaining to
the petition for review following the issuance of RTC’s decision.
The CA denied the petition and affirmed the decision of the
RTC.
On January 22, 2016, a Motion for Reconsideration was the filed
by the Petitioners praying that the decision of the CA be reversed
and set aside. On July 12, 2016, the petitioners received the
Resolution dated July 4, 2016 of the Court of Appeals, denying
petitioner’ Motion for Reconsideration of the Decision dated
December 18, 2015. Hence, on August 11, 2016, petitioners filed a
Petition for Review before the Supreme Court, docketed as G.R. No.
225579.
On November 04, 2016, petitioners received the Resolution dated
September 14, 2016 of the Supreme Court, denying the Petition for
review. On November 21, 2016 petitioners filed a Motion for
Reconsideration of the said Resolution. As of the date of the
issuance of consolidated financial statements, the petitioners are
still awaiting the Supreme Court’s resolution on the said Motion,
and accordingly, the eventual outcome of these matters cannot be
determined as at reporting date.
The management plans to explore other business opportunities for
the next twelve months in order to address the going concern
issues. The board of directors and stockholders are committed in
principle of supporting the direction the company chose to achieve
its goals.
Examination Trends Inspection of documents, accounting books,
quarterly reports and letter correspondences were conducted.
Identified audit procedures applicable on those auditable areas.
Quantitative analysis and comparison of year-to-year figures were
made. Material findings and significant exceptions were noted.
Internal audit report normally includes audit comment and findings,
risk and weaknesses and audit suggestions/recommendations to
address such weaknesses.
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[The relationship among progress, plans, issues and findings
should be viewed as an internal control review cycle which involves
the following step-by-step activities:
1) Preparation of an audit plan inclusive of a timeline and
milestones; 2) Conduct of examination based on the plan; 3)
Evaluation of the progress in the implementation of the plan; 4)
Documentation of issues and findings as a result of the
examination; 5) Determination of pervasive issues and findings
(“examination trends”) based on single year result
and/or year-to-year results; 6) Conduct of the foregoing
procedures on a regular basis.
(f) Audit Control Policies and Procedures Disclose all internal
audit controls, policies and procedures that have been established
by the company and the result of an assessment as to whether the
established controls, policies and procedures have been implemented
under the column “Implementation”.
Policies & Procedures Implementation
Delivering reports to management timely Implemented
Periodic audits by an internal auditor to access operations and
to ensure compliance of rules and regulations
Implemented
Properly securing cash and checks within a department
Implemented
Restricting access to sensitive, private, or confidential data
to authorized individuals by using password/PIN
Implemented
Procedures in safeguarding assets Implemented
(g) Mechanism and Safeguards
State the mechanism established by the company to safeguard the
independence of the auditors, financial analysts, investment banks
and rating agencies (example, restrictions on trading in the
company’s shares and imposition of internal approval procedures for
these transactions, limitation on the non-audit services that an
external auditor may provide to the company):
Auditors (Internal and External)
Financial Analysts Investment Banks Rating Agencies
The external auditor of the Corporation shall not at the same
time provide it with services of an internal auditor. The
Corporation shall ensure that other non-audit work shall not be in
conflict with the functions of the external auditor
All requested information are
provided; the Company does not interfere in influencing
analysts
conclusions. Restricted by the company from
trading in the company’s shares
All requested information are provided; the
Company does not interfere in
influencing banks’ conclusions
Have not hired any rating agencies in
the past
(h) State the officers (preferably the Chairman and the CEO) who
will have to attest to the company’s full
compliance with the SEC Code of Corporate Governance. Such
information must state that all directors, officers and employees
of the company have been given proper instruction on their
respective duties as mandated by the Code and that internal
mechanisms are in place to ensure that compliance.
Undertaking
The Chairman, president, compliance officer and two independent
directors are attesting that the Company complied with the SEC Code
of Corporate Governance. They confirmed that all directors,
officers and employees of the company have been given proper
instruction on their respective duties as mandated by the Code and
that internal mechanisms are in place to ensure compliance.
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H. ROLE OF STAKEHOLDERS
1) Disclose the company’s policy and activities relative to the
following:
Policy Activities
Customers’ welfare Deal with queries and service requests
promptly, efficiently and courteously Respond to service/product
issues and complaints fully and transparently Publish clear and
helpful information about the product/service offered/provide
Providing accurate data on market price of company’s share
Supplier/ contractor selection practice
Treat all contractor/supplier equally and based selection on the
proposal provided
If fully operational, source of equipment needed in the
exploration process. Selection of stock broker for the management
of company’s various investments in stock.
Environmentally friendly value-chain
Achieve consistently high standards of behavior towards the
society and the environment
Consideration of the environment when exploration of mining
sites will pursue. Compliance on obtaining permits from regulatory
bodies.
Community interaction Sensitively deal with issued related to
the public interest and participate in activities that are
beneficial to communities and environment.
Donate to different organizations financial assistance to
support their programs
Anti-corruption programmes and procedures
Implement transparency and integrity in all transactions
Preventing